Stocks Swing Back on Talks

Dow Nearly Erased 151-Point Intraday Slide on News of a House Session Sunday

By

Matt Jarzemsky

Updated Dec. 27, 2012 11:56 p.m. ET

NEW YORK—The Dow industrials nearly escaped a fourth-straight daily loss, recouping most of a 151-point intraday slide on reports the House of Representatives will reconvene early to try to avert the fiscal cliff.

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Stocks pared losses amid speculation the House session on Sunday might set the stage for negotiations to avoid the so-called fiscal cliff, the set of tax hikes and spending cuts set to start in January unless lawmakers can make an alternative arrangement.

Earlier Thursday, Senate Majority Leader
Harry Reid
said there may not be enough time to make a deal, sending major benchmarks to session lows.

Traders likened the rebound to last summer and fall, when reports of dealmaking aimed at Europe's debt crisis could send markets rocketing in either direction.

"If they get a deal done, I think we're going to be like a coiled spring. Our market is going to explode,"
Seth Setrakian,
co-head of domestic equities at First New York Securities, a brokerage firm.

But despite the market's response to the news, a deal remains far from certain, said
Cameron Hinds,
regional chief investment officer for
Wells Fargo
Private Bank, which oversees about $170 billion in assets.

"We would still say it's still a long shot that they would be able get something done by Monday," Mr. Hinds said.

Meanwhile, a report from the Conference Board Thursday indicated the budget uncertainty is weighing on Americans' feelings about their future. The private research group's consumer confidence index dropped to the lowest level since August and fell far short of economists' forecasts.

Other economic data were more upbeat. New home sales rose in November to their highest level in more than two years, the Commerce Department said, the latest sign of a steady housing recovery.

The number of U.S. workers filing applications for jobless benefits fell last week, the Labor Department reported. Economists were expecting an increase.

Asian markets were mostly higher as hopes for more aggressive stimulus measures in Japan continued to provide a spark. Japan's Nikkei Stock Average climbed 0.9% to the highest level since March 10, 2011, the day before the country was hit by a massive earthquake and tsunami.

The dollar soared against the yen and edged lower versus the euro.

Front-month February crude-oil futures slipped 0.1% to settle at $90.87 a barrel, while January gold futures added 0.2% to $1,662.60 an ounce. The benchmark 10-year Treasury note rose in price to yield 1.716%.

Smith & Wesson
climbed as the gun maker said its board approved an additional $15 million in stock buybacks after completing a recent repurchase program. Smith & Wesson is down more than 20% this month amid calls for tighter gun-control laws after the Newtown, Conn., school shooting.

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